Stocks and Precious Metals Charts - Economic Donkeys - Market Cheers the 'Powell Put'

"The real problem with our financial system is that our economic and political system work together to encourage excessive risk, and this risk in turn leads to cycles of prosperity and collapse. In 1998, a much smaller Lehman Brothers was placed in financial peril by the aftermath of the Asian financial crisis and failure of Long Term Capital Management, a major hedge fund. The Federal Reserve responded by lowering interest rates and other central banks followed suit. This reduced the cost of obtaining funds, effectively bailing out Lehman and other institutions in trouble.

As markets have grown to recognize how quick the Federal Reserve is to bail out institutions (and executives) in trouble, they naturally respond. In the 1990s, people talked about the “Greenspan Put” a term which derisively suggests that it is always safe to invest in risky assets, because the Federal Reserve is ready to bail out investors (a put is effectively a promise to buy an asset at a fixed price if you are unable to sell it to someone else at a higher price – this is a way to lock-in profits or limit losses on investments). However, in months following the collapse of Lehman, we learned that the “Bernanke Put” is even more valuable since Chairman Bernanke, alongside the Bank of England, the European Central Bank, and central banks in much of the rest of the world, is prepared to take drastic measures to prevent asset prices from falling when there are risks of global collapse."

Simon Johnson and Peter Boone, Economic Donkeys


"I have marked my estimates of the quality of the bounce by levels it achieves.   Given that this market is running on hot money and adrenaline, I would not tend to underestimate it."

Jesse, yesterday

Fed Chair Jay Powell gave the markets a fresh whiff of hot money in his statement today, which was widely interpreted as a dovish 'walking back' of the statement from October 3.

And the markets huffed up that blast of fresh bubble brew and took off to the upside.

Stocks were up sharply, bond yields fell, gold got a big reversal the day after option expiry, and the Dollar took a dive.

Not that the real world matters but it was interesting that a huge chunk of the physical gold inventory in the Comex Hong Kong warehouses took a hike last night.   296,000 troy ounces is about twice the gold that is ready for delivery at these prices in New York. 

As you can see from the charts below, the stock futures went through the first two retracement levels pretty handily.

It should be noted that they were stalling around the first retracement target until Chairman Jay spoke around noon.

I found it to be interesting that despite the massive and relentless bear market squeeze, which took off and never once seemed to hesitate, the VIX did not drop by a commensurate amount.

Was this a 'set piece', a contrivance of some sort?   A systemic entitlement for the insiders and financiers, another easy score for the informed among so many?   No way to tell.

We'll just have to sit in the shadow of these dark markets, and see where it all goes next.

I did notice that the spokesmodels on bubblevision used the terms 'Fed Put' and 'Powell Put' about eighty times this afternoon.

I got a chuckle when one said 'Why not buy APPL if the Fed is protecting it?'

You just can't make this stuff up.   We have learned nothing, absolutely nothing, over the past twenty years.  And it just gets worse, each time that we allow this, and forget.

And why should things change, when the current scheme of things pays off so well for a few?

Let's see where we go next.

Have a pleasant evening.

Stocks and Precious Metals Charts - Comex Option Expiration Antics - Smart Money Has Left the Building

The concept behind the Smart Money Flow Index is simple. The SMI states that:

1. The “dumb money” trades during the first half hour of each trading day (9:30 am to 10 am), while…
2. The “smart money” trades during the last hour of each trading day (3 pm – 4 pm).

 The index was invented by Don Hayes.

Stocks continued to extend the bounce today, going out on the highs after opening lower.

Below is the 'smart money' index.

I have marked my estimates of the quality of the bounce by levels it achieves.

Given that this market is running on hot money and adrenaline, I would not tend to underestimate it.

Today was an option expiration on the Comex, and the big contract was in December Gold.  This is the biggest gold futures contract of the year.

Wasn't it all too obvious?

We may see another gut check in gold tomorrow, as those who held calls in the money are now the proud owners of futures contracts if they held them into the close.

Geopolitical risk is elevated to say the least.

While the markets are cranking higher on greed and testosterone, that is the kind of market that can melt down in the blink of an eye, given the right kind of catalyst in the form of an exogenous event.

To that end I printed an update of my friend's Dow Crash Correlation Chart intraday.

Have a pleasant evening.

The Current Financial Asset Bubble in the DJIA - The Rake's Progress - 2001 Crash Metals Performance

My friend who has been creating this chart below seems rather exercised by the correlation. He has lots of charts showing the math behind it, and so forth.

What it says to me is that we are at a financial asset bubble top, which appears to have crested.

The old short seller in me knows that the resolution of this depends on what happens next.

While the 'signature' looks rather good, it must be confirmed by a market break, and then a failure of the powers of the financial system to rescue it.

I have been here many times before in the past forty years of trading.

A bull market makes everyone feel like a genius; a bear market crash brings them back down to their knees. Most investors and traders would do well to preserve what they have.

I have taken precautions for myself. You may wish to do the same.

But I am not yet actively shorting the market. This may say more about my current conservative stance towards trading.

In the early 2000's I would have been playing this to the downside, aggressively in-size and short term, in the futures markets.

But that is a younger man's game.

At some point we may see the safe havens come back into vogue. But it appears that is not yet the case.

In a general panic everything gets sold in a liquidation for the short term.

The only difference is the distribution of pain, and the speed at which some assets may rebound.

I include a relevant example from the 2001 crash below.

William Hogarth, The Rake in the Gambling Den Begging For God's Assistance

Stocks and Precious Metals Charts - Comex Option Expiration Tomorrow - Trump Says 25% Tariffs On China

After the bell Trump said he intends to impose the 25% tariffs on China now. The market was expecting this to happen after the first of the year, if ever.

Let's see if the futures sell off based on this latest assertion. Tweeter Trump says a lot of things that turn out not to be the true when cooler heads prevail.

I am starting to mark the retracement levels on the equity charts. Where this first bounce off bottom ends will tell us quite a bit.

Gold and silver were sideways today, ahead of the important December contract options expiration on precious metals tomorrow.

GM announced today that they would be closing 7-8 plants and cutting 14,000 jobs. MAGA!!

The Russians and Ukrainians are clashing on the sea. Russia seized three ships which they claimed had violated their waters and pursued illegal actions.

My sister-in-law drove home to northern Ohio yesterday, and was fortunate to miss a major snowstorm that is making its way across the Great Lakes today.

Here it is just raw and very rainy. Dolly wants no part of it, and is hiding her head in her blanket.

I did take her for a walk earlier before I went to the store, so I am content to stay parked under a blanket as well, drinking some soothing Tieguanyin tea.  It is also known as 'the Iron Goddess of Mercy.' That sounds like something from Game of Thrones, doesn't it?

Dare I have some home made soup for dinner?   With some hearty bread?  Yes, I think so. 

Cream of mushroom it is then.  With a little spicy kick to keep out the cold.

I basically use a recipe like this here.   But with some differences.

I add in a little more garlic and salt.  I use a good dried thyme instead of sprigs which I generally do not have handy.   I also add just a touch of rosemary.

I tend to use evaporated milk and a little more butter instead of heavy cream.  I saute everything in my big frying pan, and then put it into my Instant Pot slow cooker for an hour and a half at the normal temperature.  I deglaze the frying pan with sherry or rice wine and add that to the pot.

I might be tempted to add a touch of honey at the end and a little more salt if I think it needs it.

I use an immersion blender.  Not quite as smooth, but I like it a little more 'country.'  I am also lazy.

If I don't have a loaf of hearty bread handy I can use some frozen naan bread I buy in the 'family pack' at the local Indian grocery.  I glaze it with a soft butter, and lightly sprinkle it with a finely powdered garlic by McCormick that you can buy at Costco.  I keep it in a powdered sugar shaker.

I add a diced fresh jalapeno into the frying pan with the garlic.  I serve the soup with chopped scallions and a diced jalapeno for garnish.  Maybe some fresh cilantro.  My son likes it hot.  Me not so much.

Have a pleasant evening.